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San Antonio technology firm acquired for $1.9 billion

(Editor’s note: This article has been updated to correct an error — the misidentification of a Pathwire email offering.)

A Swedish company is acquiring San Antonio’s Pathwire, a Rackspace Technology spinoff that provides email services for businesses, for $1.9 billion in cash and stock — the largest such transaction the city’s tech industry has seen since 2016.

Pathwire is also the fourth major company in the local information technology and online security sectors to be snapped up by out-of-town companies in a little more than a year.

Pathwire’s buyer is Sinch, one of the world’s largest cloud communications service providers. It is paying $925 million in cash and 51 million shares of its stock for Pathwire. The acquisition is expected to close by year’s end.

Sinch is on a spree. So far this year, it has purchased two other companies — MessageMedia and Inteliquent — for a combined $2.44 billion.

Pathwire develops and markets products such as Mailgun, Mailjet and Email on Acid to help businesses better communicate with their customers. The company, which is housed in the Weston Centre downtown, says it currently has 100,000 customers, including Microsoft and Lyft.

Pathwire was founded as Mailgun in 2010 and bought by Rackspace in 2012 for an undisclosed price. In 2017, the company raised $50 million and split from Rackpace, a cloud computing company.

Chicago-based private equity firm Thoma Bravo bought a controlling stake in Pathwire in 2019.

Pathwire CEO Will Conway headed the company as general manager when it was still part of Rackspace. Its acquisition this week shows the “downstream” effects of Rackspace’s 1998 founding in San Antonio, said David Heard, CEO of local industry advocacy group Tech Bloc.

“Rackspace is the gift that keeps giving,” he said. “It underscores that impact of having wins like Rackspace that you can get these downstream wins like this for the local economy that are terrific.”

Rackspace itself was purchased in 2016 by New York private equity firm Apollo Global Management for $4.3 billion. Rackspace began selling shares on the Nasdaq exchange in August 2020, its second initial public offering.

In July, the company said it would cut 10 percent of its global workforce, or 700 employees out of about 7,000. Rackspace carried out at least half those layoffs at its Windcrest headquarters.

A $16 billion market

After Sinch completes its Pathwire acquisition, the email company will operate as its own business segment, Sinch CEO Oscar Werner said on a conference call Thursday with stock analysts.

Sinch said the worldwide market for email delivery services is worth $16 billion.

“Any company on the planet will use email at scale,” Werner said. “That’s the significance of this channel.”

It’s expensive and complicated for companies to build their own email and communication systems, so businesses use Pathwire products to manage customer contacts, schedule and deliver emails for marketing campaigns and format emails for different platforms.

“Trying to build an email service from the ground up today is going to be close to impossible — extremely expensive,” Werner said. “And when you get there, all the other players will probably have moved four years ahead.”